Fairness Opinions

Since one often hears the term “fair value” or “fair market value,” it would be easy to assume that “fairness opinion” means the same thing. A fairness opinion may be based to some degree on fair market value, but there the similarities end. Assume that you are president of a family business and the other members are not active in the business, but are stockholders; or you are president of a privately held company that has several investors/stockholders. The decision is made to sell the company; and you as president are charged with that responsibility. A buyer is found; the deal is set; it is ready to close — and, then, one of the minority stockholders comes out of the woodwork and claims the price is too low. Or, worse, the deal closes, then the minority stockholder decides to sue the president, which is you, claiming the selling price was too low. A fairness opinion may avoid this or protect you, the president, from any litigation. A fairness opinion is a letter, usually only … [Read more...]

Are You Asking a Reasonable Price for Your Privately Held Company?

Placing a price on a privately-held company is usually more complex than placing a value, or a price, on a publicly-held company. There are many reasons for this fact, but one of the top reasons is that privately-held companies don't have audited financial statements. Why are Audited Financial Statements Lacking in Privately-Held Companies? Preparing an audited financial statement is expensive and, as a result, many companies that have not gone public simply forego the expense. On the other hand, publicly held companies reveal much more information regarding their finances as well as a range of other kinds of information. Compared to a privately-held company, a publicly held company can often seem like an “open book.” Buyers are left with the proposition of having to dig out a lot more information from a privately-held company in order to assess whether or not a valuation or price is accurate. What Can You Do to Overcome this Factor? You, as the seller, can help streamline this … [Read more...]

Selling Your Business: Spend A Little Time Now, Reap Big Awards Later

If you’re a business owner, the last thing you want to think about is a future decline in the economy. An economic downturn means loss of profitability and can significantly jeopardize your business. Staying positive and motivated despite the possibility of an economic downturn keeps the business afloat. But what if you plan to sell your business within the next few years? Have you mapped out an ideal time for the sale of your company? Selling at the wrong time could decrease the value of your business and you could potentially lose money in the end, so when is the best time to move forward with your exit strategy? If your business is doing well, now might be the quintessential time to sell. “Business is great! I don’t want to sell now. Call me in a couple of years.” This is the response we often hear when contacting business owners. With business and consumer confidence at new highs, most small businesses are enjoying strong activity and growth. So why would anyone want to exit … [Read more...]

Examining the Mind of the Serious Buyer – 5 Points to Consider

Are you looking for a way to perfect your presentation? Understanding what the typical serious buyer wants will help you get your business ready for selling. Let's turn our attention to looking at what these types of individuals and entities really want. After all, your time is precious. 1. An Interest in the Industry First, prospective buyers will want to have a better understanding of your industry. Any serious buyer will want to understand the industry as a whole, as well as your existing customers, prospective customers and the strengths and weaknesses of your business. Key factors, such as threats from competition, will also be a major factor for prospective buyers. 2. Seeking Knowledge about Discretionary Costs Secondly, expect buyers to take a long look at discretionary costs. Sellers will often look to reduce their expenses in a range of discretionary areas including advertising, research and development and public relations; this is done to help make a business appear … [Read more...]

Is Now the Right Time to Sell Your Company?

Like many things in life, timing can be everything when it comes to selling your company. Every day more and more baby-boomers are now reaching retirement age. Soon, the market will likely be flooded with companies looking to sell. According to a 2016 survey of business brokers, 54% plan to exit in the next ten years. We may be on the verge of a massive wave of businesses hitting the market. Getting out in front of that wave could be in your best interests. Now very well may be the time to sell. Are You Suffering from Burnout? If you've been running your business for many years, it is quite possible that you are suffering from burnout. This issue is remarkably common with business owners and it is also very dangerous. Owners suffering from burnout don't invest as much of themselves and their creative energy into their businesses, and that has a range of implications. Everything from losing customers to failing to keep up with the competition are all possibilities when an owner … [Read more...]

If You’re Selling, Get Ready to Expect the Unexpected!

Many experts agree that the best time to prepare to sell your business is when you start your business. That may sound extreme. However, few business owners reach that level of preparedness. A simple fact of life and owning a business is that most sales are event-driven. Factors such as problems with a partnership, health issues, burnout or even divorce can drive a business owner to sell. Once you've made the decision to sell, it is essential that you realize one key fact. Unexpected events and factors will always rise to the surface. In this article, we'll explore four key questions that you'll need to address before selling your business. 1. What is the Value of Your Time? Meeting with prospective buyers can be a serious time sponge. One of the key benefits of working with a business broker is that a broker can take some of the pressure off of you. They can interact with buyers on your behalf. A large percentage of business owners are also deeply involved in the day-to-day … [Read more...]

Do I need a Business Broker ? ……… Consider this ….

Many times a private business owner who is contemplating selling their business is unsure how to start, what to do, who to turn to.  Do I go to my accountant? Do I go to my attorney? Do I need a real-estate broker (maybe my brother-in-law) to sell my property? All trusted advisors for sure. The definitive answers: No, no, and no. The real answer is that you need a good business team. That is, a good “business” Attorney and the right Business Broker. Your accountant will play an important role in providing you with the financial information you need to begin the selling process and data needed during the due diligence phase (if you get there). He or she will play an important role and may be able to provide analytics that are specific to your company.  But what does an accountant know about actually selling a business?. Your attorney may or may not be the right skill set to help you with selling the business. You will need an attorney whose role will be to ensure the legality of … [Read more...]

How Your Employees Can Boost Profits and Values

The simple fact is that without employees, you don't have a business. Given the tremendous importance of your employees, it is important to step back and reflect on the value associated with keeping those employees happy. There is a direct relationship between happy employees and happy customers. A happy employee takes steps to ensure that your customers are satisfied. This approach in turn leads to a higher level of customer retention and helps in attracting new customers. On the flip side, unhappy employees can be quite dangerous to your company's bottom line. The hiring process is a key process for the health of your business and should never be overlooked or treated as a secondary process within your business. Cultivating happy employees begins at this point. Hiring can and will either make or break your business. Offering great pay and benefits is only one important factor in keeping employees happy. A more overlooked important factor is to appreciate the contributions that … [Read more...]

Around the Web: A Month in Summary

A recent article posted on the Axial Forum entitled “What Do Buyers Look for in the Lower Middle Market?” explains how to make your business valuable to potential buyers and how to find the right buyers for your business. The buyers in the lower middle market are usually strategic buyers, financial buyers, private equity firms, and search fund advisors. Buyers in this market are generally looking for the following characteristics: A strong management team who has incentive and is prevented from competing against the company if their employment is terminated Stability and predictability of revenue and cash flow Low customer concentration Other value drivers such as state-of-the-art operating systems High level of preparedness The article warns about the biggest obstacles for owners. Business owners should consult with experienced deal attorneys and investment bankers before speaking to any buyers. They should also consult with advisors before the company goes on the market to make … [Read more...]

Don’t Let the Dust Settle on Your Lease: 8 Factors to Consider

Owners often neglect understanding their leases and this can be problematic. If your business is location-sensitive, then the status of your lease could be of paramount importance. Restaurants and retail businesses, for example, are usually location-dependent and need to pay special attention to their leases. But with that stated, every business should understand in detail the terms of its leases. There are many key factors involving leases that should not be ignored or overlooked. If you adhere to these guidelines, you'll be much more likely to control your outcomes. At the top of the list is the factor of length. Usually, the longer your lease the better. Secondly, if the property does become available, then it is often in an owner's best interest to try and buy the property or he or she may be forced to move. When negotiating a lease, it is best to negotiate a way out of the lease if possible; this is particularly important for new businesses where the fate of your business … [Read more...]